Following Ed Miliband’s pledge to freeze energy prices and the resulting objections from the Big Six suppliers, ethical energy supplier Co-operative Energy has today said that market reform and transparency is key to releasing the stranglehold of the Big Six on the UK energy market.
Ramsay Dunning, general manager at Co-operative Energy said: “Whilst we recognise the commercial need for businesses to operate profitably and support creating a healthy climate for investment, we are calling for transparency and openness in the way this is done. The British energy industry is dominated by six companies who control virtually all the UK’s energy supply with 98 per cent of households and are only slightly less dominant when it comes to generation, where they own 70 per cent. We have the perverse situation where the Big Six have championed complexity and then profit from the consumer mistrust and low switching rates this creates.
“Yet it doesn’t have to be this way and this grip on the market must be relaxed. Energy customers are not only confused but also devoid of real choice and increasingly, are unable to pay their bills. Energy is simply something we cannot easily go without and therefore provides all but guaranteed sales to large embedded suppliers – and great returns to their investors as a regulated industry. We believe by increasing competition through more diversity of generation and supply, this will open up investment opportunities from outside this cosy group. This could include the crowd-sourcing of finance from individual investors and the more active involvement of pension funds.”
For the energy sector to undergo the radical change it requires, Co-operative Energy believes a culture of real competition and market transparency is vital.
Ramsay added: “We would like to see generators placing their output into a market where all suppliers can purchase their requirements. This framework exists in the USA and countries such as Finland, where the model proves effective.”
The industry regulator Ofgem has this year proposed welcome reforms that will go some way to combating the monopoly and allow smaller players to operate more fairly and effectively in the wholesale energy markets. Co-operative Energy has outlined further measures which could help establish a level playing field, to the benefit of all energy customers. These include:
• Complete separation of generation and supply businesses in operation. In the interests of fairness and transparency, all trade dealings between them needs to be through open, monitored markets
• Abolishing existing 'club' rules on credit. These rules inhibit new and growing companies from entering the market and limit consumer choice and fair competition
• The development of a 'franchise' model for communities to develop their own utility solutions. Co-operative Energy is fully supportive of community energy projects, is actively encouraging them and has already committed to take supply from a growing number of community-based wind and hydro projects
• Make a real commitment to low carbon. The UK’s track record on renewable energy is poor and this month the indicative renewables target for 2011-12 was missed. Co-operative Energy believes that there needs to be step change in the encouragement of investment in community led renewables, local authority initiated networks and district heating systems
• Get to grips with fuel poverty. One in five UK households is now in fuel poverty. This systematic problem cannot be tackled via a regressive surcharge on energy bills (via the ECO commitment). As supporters of the Energy Bill Revolution campaign, Co-operative Energy believes the Government should use the money it gets from carbon taxes to tackle fuel poverty and make the UK’s homes super-energy efficient. Over the next 15 years the Government will raise £63 billion in carbon taxes - an average of £4 billion per year over the next 15 years. If this was recycled to households it could help to insulate millions of homes leading to lower bills, an end to fuel poverty, job creation, improved health and reduced carbon emissions
• Developing a national needs plan, and having suppliers bid to meet parts of those needs
Ramsay continued: “We believe the grip of the Big Six deters investment and the introduction of greater separation, transparency and more open markets is the only way to facilitate this.
“We hope that our proposed measures will make policy makers and the Big Six take note. As we are owned by our customers and members, our main focus is the energy customer and not profits. Since we launched over two years ago, we have continuously called for improved transparency and fairness in the market that we operate in. But whilst the Big Six firms continue to position themselves as the solution, they will always remain a fundamental part of the problem if they remain unchallenged.”